Vision Payroll

The Internal Revenue Service (IRS) has released the 2011 Form W-4, Employee’s Withholding Allowance Certificate. Form W-4 is used by employers to calculate the amount of federal tax to be withheld from an employee’s paycheck.

Employees Claiming Exempt Status Must File a New Form W-4

Employees who have provided a Form W-4 claiming exemption from federal income tax withholding must file a new 2011 Form W-4 by February 16, 2011 in order to continue their exemption from federal income tax withholding. Employers must start withholding on February 16, 2011 if employees have not provided a 2011 Form W-4 claiming exemption.

Employees Changing from Exempt to Non-Exempt Should Also File Form W-4

Even employees who are no longer claiming exemption should file a 2011 Form W-4 so that employers may calculate the proper amount of withholding. If an employee has not provided a 2011 Form W-4 by February 16, 2011, the employer should withhold based on a previously filed Form W-4 not claiming exemption, if available or using single, zero allowances, if not.

Spanish Language Form Is not Yet Available

Spanish-speaking employees may complete Formulario W-4(SP), Certificado de Exención de la Retención del Empleado. This form is generally released in April of the applicable year. Further information will be available when the form is released.

Pre-Printed Forms W-4 Are Available from Vision Payroll

Upon request, Vision Payroll can provide employers with pre-printed 2011 Forms W-4 for all active employees. Vision Payroll will not automatically change any employee’s claimed withholding allowances. Employers should update the allowances claimed by logging in to their company file or providing Vision Payroll with the updated information.

This week’s question comes from Steve, an HR director. We provide transportation benefits to our employers. In 2010, we could exclude $230 per month for most qualified transportation benefits. What is the monthly limit on the value of qualified transportation benefits? Answer: The Internal Revenue Service (IRS) in IR-2010-127 announced inflation adjustments related to several tax provisions. Among them, the IRS announced that for 2011, the monthly limit on the value of qualified transportation benefits provided by an employer to its employees would remain at $230.

Details Found in Revenue Procedure 2011-12

Details on the inflation adjustments are found in Revenue Procedure 2011-12. The eight items for which adjustments are included are the following:

1. Tax Rate Tables
2. Child Tax Credit
3. Hope Scholarship and Lifetime Learning Credits
4. Earned Income Credit
5. Standard Deduction
6. Qualified Transportation Fringe
7. Personal Exemption
8. Interest on Education Loans

Qualified Transportation Benefits Limits Are Unchanged

Employers are again allowed to exclude from wages the value of transportation benefits provided to an employee up to the following limits:

• $230 per month for combined commuter highway vehicle transportation and transit passes.
• $230 per month for qualified parking.
• For a calendar year, $20 multiplied by the number of qualified bicycle commuting months during that year for qualified bicycle commuting reimbursement of expenses incurred during the year.

Do You Still Have Questions on Qualified Transportation Benefits?

Contact Vision Payroll if you have further questions on the limit on the value of qualified transportation benefits.

The Internal Revenue Service (IRS) recently released an updated version of Publication 15-B, Employer’s Tax Guide to Fringe Benefits.

Publication 15-B Focuses on Taxation of Fringe Benefits

Publication 15-B provides an overview of fringe benefits as well as sections on fringe benefit exclusion rules and fringe benefit valuation rules. In addition, guidelines for withholding, depositing, and reporting taxable non-cash fringe benefits are also provided.

New Items for 2011

There are several new items in the revised Publication 15-B. Among them are changes in the following areas:

• Combined Commuter Highway and Transit Passes Exclusion
• Benefits for Volunteer Firefighters and Emergency Medical Responders
• Simple Cafeteria Plans
• Cents-per-Mile Rule

Publication 15-B Is a Supplement To Publication 15

Contact Vision Payroll if you any questions on Publication 15-B.

The Internal Revenue Service (IRS) has released the 2010 Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, and accompanying instructions. Employers use Form 940 to report their annual Federal Unemployment Tax Act (FUTA) tax.

FUTA Tax Must Be Deposited Electronically Using EFTPS in 2011

As previously announced, the IRS will discontinue accepting paper coupons for depository taxes after December 31, 2010. Employers should make their deposits electronically using Electronic Federal Tax Payment System (EFTPS).

Three Credit Reduction States for 2010

There are three credit reduction states for 2010: Michigan, Indiana, and South Carolina. The effective FUTA rate for most Michigan employers is 1.4% and for most Indiana and South Carolina employers it’s 1.1%. Most other employers have an effective rate of 0.8%.

2011 FUTA Rate Scheduled to Decrease

Under current law, the FUTA tax rate is scheduled to decrease to 6.0% (before SUTA credits) on July 1, 2011. The rate for the first six months of 2011 is 6.2%.

Vision Payroll to File Form 940 Electronically

Vision Payroll will file Form 940 for its clients electronically with the IRS and will not submit the paper version. Employers will be able to download a copy of Form 940 for their records.

In IR-2010-120, the Internal Revenue Service (IRS) announced that interest rates for the first quarter of 2011 would decrease from the fourth quarter. The rates are as follows:

• Three (3) percent for overpayments [two (2) percent in the case of a corporation];
• Three (3) percent for underpayments;
• Five (5) percent for large corporate underpayments; and
• One-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Revenue Ruling 2010-31 Contains Official Rate Announcement

The IRS will publish the rates in Revenue Ruling 2010-31. Contact Vision Payroll if you have any questions on the first quarter rates.

This week’s question comes from Carl, a corporate controller. I received a notice from the Internal Revenue Service (IRS) about Federal Tax Deposit coupons titled, You can no longer make required deposits using Form 8109/8109-B. Why did I receive a notice about Federal Tax Deposit coupons? Answer: As previously announced, the IRS will discontinue accepting paper coupons for Federal Tax Deposits after December 31, 2010.

Updated Guidance Issued by the IRS

Updated guidance was announced in TD 9507 (REG153340-09), published in the Federal Register on December 7, 2010. The Explanation of Provision and Summary of Comments was broken into several sub-topics.

1. Burden on Small Businesses
2. Alternative Payment Methods
3. Raising the De Minimis Amounts
4. Security and Distrust of Electronic Payment Systems
5. EFTPS Registration
6. Foreign Taxpayers
7. One-Day Rule
8. Delay the January 1, 2011 Effective Date
9. Business Days and Legal Holidays
10. Other Differences From the Proposed Regulations

Taxpayers Must Make Most Payments Electronically

Most taxpayers must make all payments electronically. Small employers (those whose tax liability on the return is less than $2,500) have three options to make payments:

• Remit employment taxes with their quarterly or annual tax return,
• Voluntarily make deposits by EFT, or
• Use other methods of payment as provided by the instructions relating to the return.

Vision Payroll Makes Federal Tax Payments Using EFTPS

Vision Payroll makes all federal payroll tax deposits and payments using EFTPS. Additional payments for taxes such as federal income taxes and federal excise taxes may be made for clients by Vision Payroll. Previous registration is required so contact Vision Payroll today to get started.

This week’s question comes from Julian, a sole-proprietor. After being laid-off from my job, I have decided to open my own business as a sole proprietor. Where can I find due dates for tax payments and filings? Answer: Each year, the Internal Revenue Service (IRS) releases Publication 509, Tax Calendars, for use during the following tax year.

Publication 509 Gives Due Dates for Many Items

A tax calendar is a 12-month calendar divided into quarters. The calendar gives specific due dates for the following.

• Filing tax forms.
• Paying taxes.
• Taking other actions required by federal tax law.

Publication 509 Is not Just a Tax Calendar

Though the title of Publication 509 is Tax Calendars, it includes more than just a single tax calendar. It contains:

• A section on how to use the calendars.
• A general tax calendar.
• An employer’s tax calendar.
• An excise tax calendar.
• A table showing the semi-weekly deposit due dates for 2011.

Four Advantages of Using a Tax Calendar

1. You do not have to figure the due dates yourself.
2. You can file or pay timely and avoid penalties.
3. You do not have to adjust the due dates for Saturdays, Sundays, and legal holidays.
4. You do not have to adjust the due dates for special banking rules if you use the Employer’s Tax Calendar or Excise Tax Calendar.

Vision Payroll Has Implemented the 2011 Due Dates in Its Tax Calculation Software

Contact Vision Payroll for further information on Publication 509.

This week’s question comes from Roy, a company controller. We received a CP 213 Notice on a Form 5500. The notice requests missing information, but that missing information was supplied with an amended Form 5500. Do we need to respond to a CP 213 notice on an amended Form 5500? Answer: A CP 213 notice is sent to notify filers of a proposed Internal Revenue Service (IRS) penalty due to a late or incomplete Form 5500 or Form 5500-EZ return. Taxpayers that receive a CP 213 should reply to the notice even if an amended Form 5500 has already been filed.

CP 213 Notices Are Sent by the IRS, not DOL

In many instances, there are two letters sent out by the Department of Labor (EFAST Contractor) asking for the missing information or addressing the late-filed return. If there is no response to either of the letters, the return is processed as is, and the information is provided to the IRS. In some other instances, this CP 213 Notice is the first correspondence between the filer and the IRS.

Taxpayers Should Respond Within Thirty Days of Notice

The CP 213 Notice gives the filer thirty days after the date the notice was issued to respond. If you believe you received a CP 213, Proposed Penalty Notice, in error, respond to the notice within thirty days of receipt. In your response, be certain to submit:

• A copy of the CP 213 Notice,
• Any appropriate supporting documents, and
• Evidence that the return was timely filed or a reasonable cause statement, or
• Evidence that the return was corrected with an amended return.

Mail Response To Ogden Accounts Management Center

Send your responses by certified mail or a traceable private delivery service to the following address:

Ogden Accounts Management Center
EP Accounts Unit, Mail Stop 6270
Ogden, UT 84201

Contact Vision Payroll for Further Information

Contact Vision Payroll if you need assistance responding to a CP 213 notice sent in error.

In IR-2010-108, the Internal Revenue Service (IRS) announced the 2011 compensation limitation for Simplified Employee Pension (SEP) plans. Under §408(k)(2) of the Internal Revenue Code of 1986, SEP contributions are generally required for any employee of an employer with a SEP plan who has attained age 21, has performed service for the employer during at least three of the immediately preceding five years, and received at least a certain level of “compensation” from the employer for the year.

2011 Compensation Limits Remains Unchanged

For 2011, the compensation limit will remain at $550.

Contact Vision Payroll for More Information on 2011 SEP Plan Changes

Contact Vision Payroll if you have questions on changes to the 2011 SEP Compensation Limitation or visit our Important Facts and Figures page for further information.

In IR-2010-108, the Internal Revenue Service (IRS) announced cost-of-living adjustments to the limits on SIMPLE plan contributions for 2011. The limitation for SIMPLE plans is codified in §408(p)(2)(E) of the Internal Revenue Code of 1986 (IRC). This section also requires annual adjustments as necessary to keep pace with inflation in a manner similar to that required by IRC §415 for retirement plans.

2011 Contribution Limits Remains Unchanged

Because the cost-of-living index in 2010 is lower than it was in 2008, there will be no increases to the amounts. For 2011, the SIMPLE plan regular limitation remains at $11,500. The age 50 and over catch-up contribution remains at $2,500 for individuals who plan to reach age 50 before the end of 2011.

Contact Vision Payroll for More Information on 2011 SIMPLE Plan Changes

Contact Vision Payroll if you have questions on the SIMPLE plan contribution limits or get further information at Important Facts and Figures.